States Continue Actions to Ensure Future of Franchising, Stop Federal Government Overreach

STATES CONTINUE ACTIONS TO ENSURE FUTURE OF FRANCHISING,STOP FEDERAL GOVERNMENT OVERREACH

WASHINGTON, February 6 — The International Franchise Association, the world’s largest organization representing all three segments of the franchise model: franchisees, franchisors, and the supplier industry, applauded last week’s actions by the Arizona, Mississippi, New Hampshire and Wyoming state legislatures to clarify that a franchisor is not the employer of a franchisee or of a franchisee’s employees under state laws relating to employment.

“We appreciate the support and hard work of state elected officials who are continuing to pave the way for local business certainty throughout our nation,” said IFA President & CEO Robert Cresanti, CFE. “Not only will these actions work to ensure the future of the franchise industry, but they will protect businesses on every Main Street in America from prior actions by unelected bureaucrats in Washington, D.C. While the administration responsible for the broadened definition of joint employer has changed, bureaucratic overreach still has the very real potential of impacting the future of small businesses throughout the U.S. Our industry needs this very basic clarification and clear direction for both small businesses and the various state government agencies that govern them.”

Specifically, the legislation – Arizona’s House Bill 2322, Mississippi’s Senate Bill 2110, New Hampshire’s Senate Bill 89, and Wyoming’s Senate Bill 94 – clarifies the relationship between a franchisor and franchisee and the relationship between a franchisee and their employees, thus establishing that an employee of a franchisee is not an employee of the franchisor. Furthermore, these measures outline that it is the franchisee that is responsible for the employment relationship including hiring, firing, discipline, supervision and direction of the employee. Under these proposed new rules, the franchisee and franchisor are considered separate entities and, therefore, not joint employers.

Actions by state legislatures to clarify the employer-employee relationship come on the heals of efforts at the federal level to expand the definition of “joint employer.” In its 2015 decision, the National Labor Relations Board (NLRB) declared California-based recycling company Browning-Ferris Industries to be a joint employer with staffing services company, Leadpoint. This decision ignored more than 50 years of regulatory and legal precedent and retroactively adopted a far broader definition of joint employer than had ever been contemplated. Since the NLRB’s ruling, thousands of small business owners have engaged at both state and federal levels in an effort to educate elected officials and policymakers about the impact on locally-owned businesses.

“The NLRB’s joint employer standard has created an environment that puts the future of small businesses on every Main Street in America at great risk,” added Cresanti. “Actions at the state level, like those we have seen this week, will allow franchising to continue to grow throughout the nation by giving these local business owners the certainty they need to succeed. And with state and local government help, we’re already seeing the tide turning.”

Nine states have already enacted laws similar to the legislation passed out state legislative committees this week: Tennessee, Texas, Louisiana, Michigan, Wisconsin, Indiana, Georgia, Utah and Oklahoma. In 2017, a multitude of other states are considering similar legislation, including: South Dakota, North Dakota, Montana, Virginia, Nebraska, Missouri and South Carolina.

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About the International Franchise Association
Celebrating 56 years of excellence, education and advocacy, the International Franchise Association is the world's oldest and largest organization representing franchising worldwide. IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising and the more than 733,000 franchise establishments that support nearly 7.6 million direct jobs, $674.3 billion of economic output for the U.S. economy and 2.5 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law, technology and business development.